GBP/USD - Lower As U.S. Key Numbers Disappoint

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 |  Includes: DBV, FORX, FXB, GBB, UDN, UDNT, USDU, UUP, UUPT
by: Dean Popplewell

By Kenny Fisher

The British pound is showing some volatility and has lost ground in Thursday trading. GBP/USD is trading just above the 1.65 line early in North American trading. In economic news, US Unemployment Claims shot higher, while Pending Home Sales took a tumble. Advance GDP posted strong gains, meeting market expectations. In the UK, Net Lending to Individuals jumped in December and easily beat the estimate.

Most analysts had predicted that the Federal Reserve would go ahead and reduce QE for a second straight month, and that's exactly what transpired on Wednesday. In a policy statement, the Federal Reserve reduced its stimulus program by another $10 billion, lowering QE to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday's policy meeting was Bernard Bernanke's last hurrah, as Janet Yellen takes over the reins as the Fed chair on February 1.

On Thursday, US Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. The markets were caught off guard by the news, as the estimate stood at -0.1%. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. Today's silver lining was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the Q3 reading of 2.8%.

British Preliminary GDP, one of the most important economic indicators was released on Tuesday. The indicator looked solid in Q4 with a 0.7% gain, matching the estimate. The reading points to healthy growth in the economy. Last week, the pound shot up as the unemployment rate which dropped to 7.1%, close to the 7.0% level which the BOE had set as a threshold for raising interest rates. The BOE minutes acknowledged that the 7.0% level would likely be reached earlier than anticipated, but this did not mean that the BOE would immediately respond with a rate hike. Nonetheless, with the UK economy continuing to show improvement, as underscored by today's GDP reading, there's little doubt that the Bank of England finds itself under increased pressure to raise interest rates.

GBP/USD for Thursday, January 30, 2014

Forex Rate Graph 21/1/13

GBP/USD January 30 at 15:25 GMT

GBP/USD 1.6505 H: 1.6564 L: 1.6445

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6231 1.6329 1.6416 1.6549 1.6705 1.6964
Click to enlarge
  • GBP/USD is showing volatility in Thursday trading. The pair touched a low of 1.6445 early in the European session but has since moved back above the 1.65 line.
  • On the downside, 1.6416 continues to provide support. This line faced pressure in the European session when the pound dropped sharply before recovering. This is followed by support at 1.6329.
  • 1.6549 has reverted to a resistance role. This is followed by resistance at 1.6705.
  • Current range: 1.6416 to 1.6549

Further levels in both directions:

  • Below: 1.6416, 1.6329, 1.6231 and 1.6125
  • Above: 1.6549, 1.6705, 1.6964, 1.7182 and 1.7246

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Thursday trading, continuing the trend we have seen since for most of the week. This is not consistent with the pair's movement, as the pound has posted losses. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to move to higher ground.

The pound has shown strong movement in both directions on Thursday. GBP/USD has is steady early in the North American session.

GBP/USD Fundamentals

  • 9:30 British Net Lending To Individuals. Estimate 1.9B. Actual 2.3B.
  • 9:30 British M4 Money Supply. Estimate 0.3%. Actual 1.4%.
  • 9:30 British Mortgage Approvals. Estimate 73K. Actual 72K.
  • 13:30 US Advance GDP. Estimate 3.3%. Actual 3.2%.
  • 13:30 US Unemployment Claims. Estimate 331K. Actual 348K.
  • 13:30 US Advance GDP Price Index. Estimate 1.2%. Actual 1.3%.
  • 15:00 US Pending Home Sales. Estimate -0.1%. Actual -8.7%.
  • 15:30 US Natural Gas Storage. Estimate -225B.

*Key releases are highlighted in bold

*All release times are GMT

Disclosure: This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.